Professional · Boise, ID · Member since 2014 · 88 posts · 29 votes
So I am in the process of purchasing my first home.
I came across some information online that decribes the method of "equity sharing". Basically, having an investor cover the downpayment on the home you want to buy in exchange the investor gets an agreed upon percentage of the home's equity.
Is this a good idea? Anyone have experience in this?.
I have heard of this. Im not sure how well it works. I would predefine the possible exit strategies. For example, you will discuss selling or refinancing the investor out of the house at the end of year 3, 5, or 7. Also what percentage does the investor make? If you are making the payments every month, does the investor get a percentage of that equity when it comes time to sell? Lots of questions to answer. Knowing how and when you are expected to get out of the arrangement will keep all eyes on the prize, and keep you from getting screwed.
Yes, multiple exit strategies are very much needed for this. From what I understand the investor get the agreed upon percentage of equity when the property is sold. I am not sure how it works with refinancing, I would be interested to know though.